What Is Tether?
Tether was formerly known as Realcoin and is traded as USDT. It is a cryptocurrency launched by Tether Operations Limited in 2014. Tether Operations Limited is a company owned by Bitfinex, the Hong Kong-based cryptocurrency exchange Bitfinex. Tether is conceived as a stablecoin, a cryptocurrency tied to a real asset or commodity to provide value stability and reduce market volatility.
Stablecoins can be tied to real currencies such as USD, Euros, or Swiss francs or valuable commodities such as precious metals. In the case of Tether (as you can guess from the acronym USDT), it is tied to the U.S. dollar. Therefore, Tether Operations Limited ensures that its circulation in the cryptocurrency market is maintained at a 1:1 ratio to the USD.
This means that for every USDT, there is one dollar in Tether Limited reserves. So, for example, when someone deposits $10 into their Tether account, 10 USDT coins are minted.
Who Created the Company Tether?
The Tether project, which used to be called Realcoin, was first launched by Tether Limited in 2014. The development of this project has an interesting backstory.
Around the early 2010s, two groups started working on the idea that Bitcoin’s blockchain could be used as a platform for issuing cash. The two groups were a startup called Realcoin and the Bitfinex cryptocurrency exchange. The two projects eventually merged, leading to the creation of Tether Limited. It was co-founded by Brock Pierce, director of the Bitcoin Foundation, Reeve Collins, and Craig Sellars.
Its main goal is to make government-issued fiat currencies more compatible with new cryptocurrency assets traded around the clock on active global markets. Tether was one of the first cryptocurrencies and remains the most successful stablecoin today.
How Does It Work?
Initially, USDT tokens were only issued based on Bitcoin using the Omni Layer protocol, a platform for creating and trading digital assets on top of Bitcoin. The protocol allows projects to create and trade their currency. It also supports minting and destroying Tether tokens based on the number of tokens in storage. It also helps to track and report the total number of Tether tokens in circulation. With Omni, Tether’s ledger is stored on the Bitcoin blockchain, and users can view their verified transactions through Omni Explorer.
Tether tokens are now issued on the Ethereum blockchain using the ERC-20 protocol, the Tron blockchain using the TRC-20 protocol, the EOS blockchain, the Algorand blockchain, and the Liquid Network.
Tether Limited manages its token pool and accepts legitimate deposits and withdrawals. It also mints and destroys tokens to maintain a stable coin value. Tether Limited accepts cash deposits and withdrawals on behalf of its customers and is responsible for minting and destroying Tether tokens based on the reserves they manage. For example, when someone deposits $10 into their Tether account, 10 USDT tokens are minted.
What Are the Benefits of Tether(USDT)?
The main positive factor is that there is no need to calculate the price in other units. Instead, the familiar and most popular fiat currency becomes the reference point. And besides the classic advantages of cryptocurrency: cryptographic security, decentralization, transparency, and openness to all, availability to individuals and legal entities on the same terms.
Tether (USDT) is very popular as a stable currency and has become the third-largest cryptocurrency by market value.
For what purposes is Tether (USDT) used?
Trade
Users can convert fiat currency to USDT and then freely trade any virtual currency on the cryptocurrency market.
You could say that a day in the cryptocurrency world is a year in the regular world, and the volatility of a random virtual currency is enough to make an investor pretty full. Therefore, more and more users prefer the BTC/USDT virtual currency pair for bitcoin trading.
In addition, since most pairs in the cryptocurrency world are based on staple pairs such as BTC/USDT, ETH/USDT, etc., owning USDT also ensures that users are the first to enter the market and do not miss out on trading opportunities.
Borrowing
In a crypto-trading market where users often resort to borrowing to fund their entry, borrowing assets with a stable USDT coin eliminates the need to worry about losses from price fluctuations.
International Money Transfers and Payments
USDT overcomes global payment barriers, and it takes just minutes to make an international payment using Tether tokens.
Hedging
In times of market uncertainty, investors are in no hurry to enter the market. Instead, they usually prefer to cash out most of their cryptocurrency and wait for the right time to buy.
This is the best time to convert into a stable USDT and return it to a cold wallet for storing without fear that the exchange will go bankrupt or the cryptocurrency in your wallet will depreciate significantly.
Other Tether Cryptocurrencies
In addition to USDT, Tether offers other base coins: EURT: a Tether coin tied to the Euro, CNHT: a Tether coin tied to the Chinese yuan, and XAUT: a Tether coin tied to real gold.
Conclusion
Tether is currently considered one of the most valuable crypto-assets in the world, with over $72 billion worth of USDT in circulation. You can buy Tether on almost any cryptocurrency exchange in exchange for fiat money or cryptocurrencies. Tether has gained tremendous support in the cryptocurrency community because of its characteristics. It is constantly used by traders in their transactions and by ordinary users for personal needs.
